Non-profit organizations, instead of the government, will gradually take the lead in providing public services such as education, medical care and scientific research.

Senior legislator Cheng Siwei announced Tuesday the projected goals of restructuring China's various public institutions, most of which have in the past been sponsored by the government.

"We should change the current situation, where the government dominates public service," said Cheng, vice chairman of the Standing Committee of the National People's Congress, in an address at an international forum organized by the National Development and Reform Commission.

Together with China's extensive restructuring of state-owned enterprises (SOEs) and the reshuffling of governmental agencies, Cheng regards the new reforms as another hard nut for the government to crack as the country moves toward a market-oriented system.

The commission is responsible for a national research project in regrouping China's 1.3 million shiye danwei (public institutions), which employ more than 28 million people.

Before China embarked on the track of reform and opening in 1978, all institutions, like SOEs, were funded and run by the state and were seen as a means to realize the state's will.

"The government has direct administrative control over the institutions, but more and more disadvantages have arisen, especially since 1978 with the implementation of reform policies geared toward the market economy," said Cheng.

Most strikingly, the excessive dependence of public institutions on state appropriations has become such a heavy burden that the state treasury can hardly bear the costs any longer.

"In a market economy, the government's role is quite different from that of a planned economy. It cannot bring all the public institutions under its umbrella," said Fan Hengshan, the commission official in charge of economic reform.

Last year, the Ministry of Personnel announced the end of the "iron rice bowl" lifetime employment policy for the 28 million public employees within the next three years.

This means the end of a system that has long been enjoyed by SOE personnel. Instead, employment contracts will be introduced and drawn up between state-owned institutions and their employees over the next three years.

The overhaul will lead to a number of positions being deemed redundant and rounds of layoffs.

"The task of restructuring is pressing but thorny, because 28 million employees is no small number," said Fan. "Experiences of the sophisticated market economies should be studied."

Recently, the Ministry of Science and Technology also released a public institutions reform plan that is based on the framework of developed economies. Institutions involved in basic research, compulsory education, environmental protection and disaster control should still receive support from the government.

Meanwhile, non-profit organizations, positioned between governmental organizations and private businesses, should play an important role in public service fields like culture, education, health and social services.

These sectors can yield profits, but the profits should be limited to reasonable levels and used for further development but not distributed, the ministry said.

(China Daily March 24, 2004)